Inflation's Reduction of the Real Minimum Wage and Unemployment in the USA : 1987 to 2021

Hundreds of articles have been written that include empirical estimates of the employment effects of minimum wages; however, many of these articles find statistically insignificant effects, some find significant negative effects, and a few find significantpositive effects. Most of these studies use multivariate analyses which can be criticized for omitting key variables. The omitted variables problem ruins all statistics and estimates. This paper uses reiterative truncated projected least squares (RTPLS), asolution to the omitted variables problem, to estimate the percentage increase in unemployment due to a one percent increase in the real minimum wage using monthly data for the 50 states of the USA from 1987 to 2021. RTPLS produces a separateelasticity for every observation where differences in these estimates are due to omitted variables. We find that the percentage change in the unemployment rate due to a onepercent change in the minimum wage ranges between 1.156 and 3.389, that the elasticities for different states tends to move together over time, and that all of these elasticities are statistically significant at a 95 percent confidence level